Fuel price cut has no effect on commodity prices – Chinamasa

Finance Minister, Patrick Chinamasa on Monday said the plummeting price of oil on the world market which has also resulted in a reduction in the price of petrol and diesel on the local market has no immediate effect on commodity prices.

Addressing hundreds of people who attended the fuel price dialogue held in Harare, Chinamasa said Zimbabwe will not enjoy the recent global fuel decrease any time soon.

“When input prices fall, like the recent global fuel price reductions, wholesale and retail prices may not come down immediately largely due to the downward price rigidity phenomenon that tends to characterise goods and labour markets like wages,” said Chinamasa.

Global oil prices have declined sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations, while consumers in many importing countries are paying less to heat their homes or drive their cars, Zimbabwe has not yet enjoyed these benefits.

“It is a fact that the reduction in the global fuel prices has some significant multiplier effects on oil-importing countries as a result of cost savings on fuel expenditure,” said the minister.

Chinamasa was however optimistic that the country’s expenditure on fuel is highly likely to decline.

“At a national level we spent approximately $1.3 billion on fuel in 2013 and the same figure in 2014. This year our projection is $1.2 billion,” said Chinamasa.

The minister urged customers to consume local goods as a way to recover the economy.

“Stronger private consumption on the domestic goods and services will also help stimulate local production which is crucial for the recovery of our great nation.

“For those with relatively high propensities to spend, let that spending be on locally produced goods. This will stimulate domestic aggregate demand which will benefit local industry,” he said.